India has scrapped a rule mandating traders to export 20 percent of all gold imported into the country, in a surprise move that could cut smuggling and raise legal shipments.
Last year India introduced the so-called 80:20 import rule tying imports to exports of jewellery to bring down inbound shipments and narrow the current account deficit that hit a record, and only days ago there were talks between officials of the central bank and finance ministry to bring back curbs on some trading houses following a surge in imports over the past few months.
But, without giving a reason for the change in the rule, the Reserve Bank of India stated "it has been decided by the government of India to withdraw the 20:80 scheme and restrictions placed on import of gold. The government's move came as a surprise even to some officials, as it was announced that the government instructed the RBI to urgently change the rule.
The rule change was a relief to jewellers facing difficulties in sourcing gold during the key festival and wedding season that started in October.
According to one analyst following the disbanding of the 80:20 rule the government may place a monthly or yearly quota for traders, which would be a more logical and simple way of monitoring and limiting gold imports.